Two-thirds of Americans can’t pass a basic financial literacy test, according to a study of 80,000 people by FINRA Investor Education Foundation. That means the majority do not have the knowledge needed to make smart financial decisions, potentially costing them thousands of dollars over a lifetime in missed investment opportunities, debt, poor saving habits and more. At even greater risk are minorities, less-educated individuals and women. While the gender gap is closing for females of younger generations thanks to financial education in schools, a 10 percent knowledge gap still exists between millennial men and women. So what steps can you take to become financially literate, you ask? The following is a brief overview of the basics.

Assess your finances

Before you even begin to save and invest, you need to understand your financial health, taking into account everything from credit card debt, student loans, monthly bills, income and savings.

Spend a day pouring over finances and cataloging everything—annual income pre- and post-taxes, debts, credit cards, mortgage payments, savings, IRA or 401K contributions, and subscription membership services, such as Netflix and gyms.

Group expenses into two categories—essentials and nonessentials. Essential expenses include housing, utilities, groceries—things you cannot live without. Nonessentials include wants and elective spending, such as entertainment.

Once this is done, determine your debt-to-income ratio by adding all of your monthly essential expenses and dividing that total by your total monthly income.

The basics of budgeting

Now that you know where your money is going, it’s time for fine tuning.

The 50/30/20 budget guideline divides your take-home pay into percentages to help establish a baseline for financial health:

• 50 percent of your take-home pay should be spent on necessities

• 30 percent should be spent on wants

• 20 percent should be saved or put toward financial goals.

Groceries are unique because they straddle the line between wants and needs. You need to eat, but do you need name-brand cereal? Food is one of the easiest areas to cut your budget.

Continue to monitor every dollar in and out to keep yourself on track. Need help with this? Lean on apps to carry the load. Mint, YNAB and Wally are widely used for creating and maintaining a budget. They’ll help you categorize expenses, connect to your bank and track your remaining budget throughout the month to deter overspending.

Conquering debt

Despite what you may hear, not all debt is bad. Good debt, such as reasonable car or student loans, as well as mortgages, show banking institutions you’re capable of paying back what you owe, and this can help you build your credit score. Bad debts include high-interest credit card balances carried over month to month. Often times, you pay more in interest than the original purchase cost. So how do you tackle these debts and improve your financial footprint?

Pay off high-interest debts first. Take a look at the debt balances carried on each of your accounts and focus on the one that carries the highest interest rate (while still paying the minimums on your other debts). If it’s credit card debt you’re combating, call the issuer to ask for lower rates. Eliminating high-rate accounts first frees up money you’re spending on interest.

If seeing progress is more important to you, try the snowball method. The snowball method may not save you the most in interest in the long run, but it generates quick momentum. Focus the majority of your payment on your smallest debt. Once that’s eliminated, move on to the next smallest and so on. For some, seeing quick results is essential to their quest for a debt-free life.

Student loans, car loans and mortgages are often debts with low interest rates and can be paid off slowly over the duration of the loan. Of course, if you don’t have debt with higher interest, it doesn’t hurt to pay more than the minimum each month.

Read the rest of Camalot Todd’s article at the Las Vegas Sun